Retail giant Wal-Mart Stores Inc. (WMT) may scale back its planned takeover of Massmart Holdings Ltd. (MSM.JO) and is now considering making an offer for control of the African company in order to maintain its Johannesburg listing.

Wal-Mart, after meeting with major Massmart shareholders and key South African stakeholders regarding its proposal to acquire the African retailer in a 32 billion rand ($4.5 billion) deal, is now considering a partial offer for more than 50% of the company, Massmart said in a statement Thursday.

The Bentonville, Ark., company is investigating the merits of retaining Massmart's listing, Massmart said. The indicated cash offer price remains 148 rand a share, it said.

The news weighed on Massmart's shares, which by 0740 GMT were down 1.9% at 138.80 rand against a modest rise in the wider market.

The two companies have been in exclusive talks since Wal-Mart said Sept. 28 it had made a nonbinding proposal that could lead to a bid for Massmart. South African labor unions have come out against the proposed takeover, accusing Wal-Mart of a legacy of union bashing.

The due diligence process continues and no formal offer has been tabled. Massmart said that if one is received, it will obtain an independent opinion and express its views to its shareholders.

Wal-Mart in an emailed reply to questions said it is exploring a variety of options, but believes Massmart represents a compelling growth opportunity and has a talented management team. It said it has several different models for international ownership, including 100% ownership of operations in markets such as the U.K. and 68% ownership of Walmart de Mexico.

South African companies across a number of industries have attracted interest from international firms keen to gain a foothold on the continent, where steadily growing economies and a relatively young population of about one billion offers huge consumer potential.

U.K. lender HSBC Holdings PLC (HBC) was until recently considering an offer for control of Nedbank Group Ltd. (NED.JO) and Japan's Nippon Telegraph & Telephone Corp. (NTT) this month secured a $3.2 billion takeover of Dimension Data Holdings Ltd. (DDT.JO). However, plans for MTN Group Ltd. (MTN.JO) to merge with India's Bharti Airtel Ltd. (532454.BY) failed last year, partly because South Africa's government wanted to preserve MTN's listing.

Massmart, which was founded in 1990, operates several chains, including Game for general merchandise, Builders Warehouse for construction and home improvement and the Makro warehouse-club stores. The bulk of its 288 stores are in South Africa, although it also operates in 13 other sub-Saharan countries.

In its annual report published Thursday, Massmart said its sales have continued to rise in the new financial year and are up almost 15% in the 14 weeks through Oct. 3. Comparable sales for the period were 9.2% higher, Massmart said.

"If current South African economic and trading trends continue for the financial year, Massmart should achieve profit growth, before any foreign exchange translation adjustments, ahead of sales growth for the full year," the company said.

It reported total sales up 10% to ZAR47.45 billion in the year through June.

-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com
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